GBP/USD: Correction weaker before a trend stronger – MUFG

GBP gained further in January, mainly versus USD. Economists at MUFG Bank believe that the Pound could struggle in the near term before a sustained appreciation trend emerges.

Global risk a key support for GBP

“The sharp decline in natural gas prices and the continued reopening of China have helped lift global growth expectations and equity markets. The rolling correlation of GBP and global equity markets is currently close to multi-decade highs underlining the importance of broader market conditions.” 

“A sense of political stability, a less severe recession and policy rates peaking should help confidence in the UK improve later this year. However, there remains a probability of a worsening in global investor risk sentiment which could see GBP weaken in the near-term before a sustained appreciation trend emerges.”